What happens when municipalities can't afford market rate?

What happens when your town can’t afford market rate anymore?

Whether we’re talking about employees or housing, that question points to a fundamental problem that warrants more than the “Well, we just have to make do with less” attitude that surfaces nearly every time the subject comes up at a meeting.

And it doesn’t have to be a town. It can be a city, village, county, or any municipality in between. The point is broader. What are we ignoring when we simply accept the premise that a community can no longer afford market rate?

That, well, we just can’t afford to pay what talented people are earning elsewhere, so we’ll keep pushing forward. We’ll leave positions open, stretch existing employees thinner, combine responsibilities and hope someone eventually applies, while taxpayers continue paying for a service that, in some cases, can’t even be executed properly because the municipality has decided the market itself is optional.

I think that’s the part of this conversation that gets forgotten most often. Paying less for a position is talked about like it automatically represents savings to taxpayers, but what’s the cost when a service is operating at 50% capacity? What’s the cost when a department has three people doing the work of five, or when an employee spends half their week performing tasks that aren’t really part of their job because the position next to them has been vacant for a year?

And what’s the cost when the people doing that work, despite their best efforts and intentions, don’t have the time, resources, or support needed to maximize its potential? Those costs are harder to quantify, but that doesn’t make them less real.

For years, I’ve listened to some version of the same argument get set forward like it’s gospel: “Payroll is our biggest expense, so we need to cut costs!”

Sure, payroll is a major expense for most municipalities, but that’s because municipalities are largely service organizations. They employ people to plow roads, inspect buildings, maintain infrastructure, process permits, administer programs, handle finances, enforce codes, respond to emergencies, plan for development, and perform dozens of other functions residents expect government to carry out.

People are the product. So when someone says payroll is the biggest expense, my first reaction isn’t necessarily that something has gone wrong. My first reaction is “Of course it is.” The more interesting question is whether taxpayers are getting value from that expense.

Because if you’re fighting over 5% of a position’s total cost while simultaneously hampering that employee’s ability to perform at a much greater level (or where it was intended at conception), what exactly have you saved?

I’ve talked to a lot of people who have worked in different roles and layers of municipal government — career positions, elected ones, appointed ones, and literally everything in between. The trope from the outside is that nobody in government works hard. The reality, though, is that many people working in municipal services are far more familiar with doing “more with less” than people in the private sector.

Part of that is because hiring can be dramatically easier in the private sector. A private employer recognizes that a position paying $55,000 isn’t attracting qualified candidates anymore and increases the salary, changes the benefits, or adjusts the job until the position becomes competitive.

Government doesn’t always work that way.

There might be a salary schedule, union contract, civil service requirement, residency restriction, board approval process or simply a philosophical resistance to acknowledging that the labor market has changed. So the position stays at $55,000, nobody applies, and then everyone wonders why nobody wants to work anymore.

This problem becomes even more obvious when you connect employment to housing.

I’ve heard stories from people who accepted municipal jobs after being told they would be able to move into the community, find housing, and build a decent life on the salary being offered. Only to start and discover months later the math doesn’t work. Apartments might be scarce, rent may be substantially higher than expected, homes may be beyond what the salary can support, or the municipality might be close enough to a higher-cost employment center that local housing prices reflect wages being earned somewhere else.

Whatever the reason, the result is the same: The community needs the employee, the employee wants the job, and the employee cannot afford to live there.

That should concern us for reasons that extend far beyond municipal staffing. If the people who work in a community cannot afford to live anywhere near that community, you have a structural problem.

That applies to teachers, police officers, firefighters, highway workers, nurses, social workers, planners, clerks, restaurant workers, retail employees, child care workers and young professionals. We often treat housing affordability and workforce shortages as separate political issues, but increasingly they are the same issue.

To make matters worse, some municipalities still maintain residency requirements for certain jobs.

Think about the contradiction there: We want you to work here, we may require you to live here, we are not going to pay enough for you to comfortably live here, and then we’ll complain that we can’t fill the position.

That’s an institutional choice. Nothing else.

I say all of this because, at the end of the day, municipal government is supposed to be about delivering service as effectively as possible — the best it can.

That doesn’t mean writing blank checks. It doesn’t mean every employee deserves every raise requested. It doesn’t mean taxpayers shouldn’t demand efficiency or scrutinize spending. They absolutely should.

But efficiency and cheapness are not the same thing.

If you constantly undercut or undervalue your employees, your services will suffer in kind. We understand this instinctively everywhere else. If you hire the cheapest contractor available to renovate your house and they do terrible work, nobody congratulates you for saving 12%. If you buy the cheapest piece of equipment available and have to replace it three times, nobody calls that fiscal discipline. If a business refuses to pay competitive wages and consequently cannot maintain operating hours, customers don’t care that management technically saved money on payroll. They care that the doors are closed.

Government should not get a special exemption from this logic.

And this is where I think municipal leaders need to have a much more serious conversation about what they actually want government to do.

If your intent is truly to save money, then the more honest conversation might be about ending a service entirely. That sounds harsher than shaving a salary line or refusing to fill a vacancy, but at least it forces the actual tradeoff into the open.

Do we want this service? If the answer is yes, what does it cost to operate it well? If we are unwilling to pay that amount, what level of service are we actually accepting? Or why are we offering this service at all?

Those are much better questions than simply asking how little we can pay someone and still technically have a department.

Because sometimes government preserves the shell of a service while quietly destroying its capacity. The department still exists, the title still exists, the line item still exists and the responsibility still exists, but half the positions are empty and everybody working there is overwhelmed.

On paper, taxpayers still have the service. In practice, they don’t.

If a service can only be delivered at 50% capacity, that will eventually leave a lot of people unhappy — probably far more people than would have been unhappy about the raise necessary to properly staff it.

And that gets to another strange dynamic around local government. The people who become angry when a municipal employee gets a raise are often much louder than the people who are quietly frustrated because their permit took six months, their road project got delayed, their assessment question went unanswered or nobody returned their call because the department is underwater.

It’s similar to what happens at zoning and planning board meetings. A handful of people show up to oppose a new housing development, speak passionately and sometimes fill the room, and then everyone assumes that must represent what the community wants.

Meanwhile, the silent majority includes the people who never attended the meeting because they were working, raising kids or simply didn’t know it was happening. It includes the 25-year-old wondering why there’s nowhere to rent, the 35-year-old wondering why every starter home costs more than they can afford, the employer wondering why they can’t recruit anyone and the municipal administrator wondering why their newest hire lasted six months before moving somewhere cheaper.

Government meetings have a way of magnifying the loudest objection while obscuring the much larger consequences of doing nothing.

Staffing is no different. Someone sees a headline about a 6% raise and gets angry. Someone else sees that the planning department has carried two vacancies for 18 months and asks a very different question: Why do we even have this department if we refuse to staff it?

That’s the tension worth examining.

There are absolutely municipalities facing legitimate financial constraints. Some tax bases are stagnant, some communities are losing population, infrastructure is getting older, state mandates continue, health insurance costs rise, equipment costs rise and construction costs rise. There is not an endless amount of money.

But scarcity does not eliminate the responsibility to make choices. It makes those choices more important.

If your community can’t afford the market rate necessary to employ the people needed to operate its government, something has to change. That might mean raising salaries, eliminating residency requirements, consolidating services with neighboring municipalities, sharing specialized employees across jurisdictions, reducing the number of services government provides so the remaining ones can actually be funded properly, creating more housing or acknowledging that keeping taxes artificially low carries consequences of its own.

What it cannot mean forever is, “We’ll just make do with less.”

Eventually, less becomes insufficient.

And insufficient government is not cheap government. It’s government taxpayers are still paying for, only without receiving the full value of what they bought.

That distinction matters, because the goal shouldn’t be to operate government for the lowest possible number. It should be to determine what services a community needs, what it costs to provide them competently and whether residents are willing to pay that price.

Anything else is just delaying the conversation.

And sooner or later, the market has a way of forcing it anyway.

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